Secret HealthSouth recording cites repercussions

Published: Friday, February 11, 2005

Associated Press

BIRMINGHAM, Ala. (AP) - As agents closed in on fraud at HealthSouth Corp. two years ago, then-CEO Richard Scrushy told an aide "everybody goes down" if problems with the rehabilitation giant's financial statements become public, according to a secretly made recording played at Scrushy's trial Thursday.

Later the same day, amid what prosecutors describe as more discussions of the scheme, Scrushy reminded the same executive there were eight children in the Scrushy family.

"They need their daddy," said Scrushy, whose wife has since had another child.

The recordings were made in March 2003 by former HealthSouth chief financial officer Bill Owens, who was cooperating with the FBI and has since pleaded guilty in the fraud. Jurors listened to recordings through headphones during Owens' seventh day on the witness stand.

While prosecutors contend the recordings prove Scrushy was behind a scheme to overstate earnings by some $2.7 billion over seven years beginning in 1996, the defense claims they demonstrate Scrushy's innocence by revealing Owens as the mastermind.

Several times in the recordings - made shortly before a raid of HealthSouth headquarters - Scrushy asked Owens "What do you want me to do?" and referred to things Owens had done regarding the company's finances.

On the recording, Owens told Scrushy his wife had threatened to divorce him in anger after learning of unspecified things he had been doing with the company's finances. Owens told Scrushy he couldn't sign an amended quarterly report - which Owens testified earlier contained bogus numbers - until he worked out things with his wife.

In a separate courtroom around the same time, former HealthSouth president and director James P. Bennett pleaded not guilty to charges including fraud, conspiracy, insider trading, money laundering and lying to the FBI about the scheme.